Home loan interest rates: May 2024

On May 8th, 2024, the RBA decided to hold the cash rate at 4.45%.
Ava Crawford
Written by
Ava Crawford
Janez Debevec
Reviewed by
Janez Debevec
Last updated
May 17, 2024
0 minute read
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Australian home that payments are subject to RBA movements

Purchasing a home stands as one of the most substantial financial commitments individuals undertake. The usual duration of a mortgage spans from 20 to 30 years, thus necessitating careful consideration of various costs, particularly the interest rate attached to the home loan.

The fixed and variable interest rates are subject to fluctuations in the market. Therefore, it is crucial to stay abreast of the direction in which these rates are moving, regardless of whether you are in the process of buying a home, making investments, or refinancing.

We vigilantly track the actions taken by the Reserve Bank of Australia in relation to the cash rate. This ensures that you stay well-informed about how changes in monetary policy impact your mortgage repayments.

Below are the key details you should be aware of regarding home loan interest rates for the current month.

Average home loan rates in May 2024

  • Cash rate: 4.35%
  • Average variable rate home loan (OO, P&I, LVR <80%): 6.80% p.a.*
  • Average 2-year fixed home loan (OO, P&I, LVR <80%): 6.33% p.a.*

At the time of writing, the average rates for a home loan amount of $400,000 owner-occupier (OO, P&I, LVR >80%)* are:

  • Variable rate: 6.80% p.a.
  • 1-year fixed rate: 6.46% p.a.
  • 2-year fixed rate: 6.33% p.a.
  • 3-year fixed rate: 6.26% p.a.
  • 4-year fixed rate: 6.46% p.a.
  • 5-year fixed rate: 6.51% p.a.

*Mozo data

May 2024 home loan insights

In recent months, the Reserve Bank of Australia (RBA) has maintained a steady cash rate at 4.35%, signalling a potential shift into a new interest rate era characterised by stability. This suggests that we may have reached the pinnacle of the significant rate hikes that defined the previous year. While home loan interest rates have indeed seen an increase, indications point towards them having plateaued.

This presents a favourable window to conduct a thorough comparison of home loans and make decisions that align with your financial situation and budget. The likelihood of a predicted reduction in the cash rate by experts at the Big Four Banks in late 2024 may result in lowered home loan rates. Opting for a variable home loan now could potentially lead to significant cost savings in the near future.

Conversely, in anticipation of potential adjustments to official rates, lenders may be inclined to lower fixed home loan offers to attract customers. Locking in a fixed interest rate when these offers become available can offer added financial security for your budget, especially if you prefer consistent repayments over an extended period.

Check out our Average Mortgage in Australia page for a more detailed look at the impact of the RBA over the last year.

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How much are interest rates in Australia?

Home loan repayments in Australia vary largely based on the property value, the details of the home loan (like the interest rate and loan term), and the size of the home loan deposit.

Before you commit to a home loan, it’s important to assess your financial situation to make sure the repayments are in your price range. This is especially important as interest rates can fluctuate and you’ll need to be able to make your repayments even if they increase.

Depending on the home loan term, whether you make additional repayments, if you refinance at any point, you’ll be able to plug your mortgage into a repayments calculator to work out what your individual home loan repayments will be.

If you are on a fixed rate home loan, your interest rate will be set for a pre-determined time (usually between one and five years). On a variable rate home loan, the interest rate on your home loan will follow reserve bank movements.

Like with many loans, often introductory offers do apply. Make sure to check the comparison rate for a realistic look at the interest rate you’ll be paying on your home loan.

Are Australian interest rates higher with a 5% deposit?

Interest rates will be different from home loan to home loan, but in general, they tend to be higher with the more risk your borrowing presents to lenders.

A 5% deposit presents a fairly high level of risk, as it tends to go hand in hand with a high loan amount. This means that you may see higher interest rates, thorough checking of credit scores, and stricter lending criteria for these loans.

If you see a low-deposit home loan boasting an eye-catching low-interest rate, it may be worth checking the comparison rate for a more accurate prediction of the interest you will pay over the duration of the loan. This accounts for any introductory offers or interest-only periods. This will also be impacted by your choice between a variable rate and a fixed rate.

Are Australian interest rates higher with a 10% deposit?

While Aussie interest rates are dependent on many factors, a smaller deposit than 20% may mean higher interest rates.

Remember that interest rates are calculated based off many more things. These will include your loan amount, the home loan you are applying for, your record of genuine savings, and your credit history. If your credit score is in the best possible condition, with any personal loans and credit cards showing timely and regular repayments, you will be more likely to secure a competitive interest rate.

Remember that a 90% LVR home loan like this may also have stricter eligibility criteria than a loan with a larger deposit.

Do no or low deposit home loans usually incur higher interest rates?

In general, you’ll get low interest rates on low LVR loans. But, it really depends on the type of home loan you select, and the kinds of additional services you require (such asn offset, redraw, fixed or variable rate). But there are definitely instances where you could get competitive interest rates (like with guarantor home loans which you can learn more about here).

This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.

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